Zillow’s lucrative—but challenging—path to mortgage glory

KBW analysts Ryan Tomasello and Bose George recently published a fantastic report detailing the company’s future. They noted that while Zillow’s funnel captures two-thirds of all U.S. home shoppers, the company currently only monetizes a mid-single-digit percentage of existing home sales. Numerous funnel optimization initiatives aimed at driving stronger engagement and higher conversion rates should improve that figure markedly in the coming years. That should have an outsized impact on revenue. 

Attach rates

“Put in context, we estimate every $1,000 of incremental revenue per transaction represents a ~$200-400mn incremental annual revenue opportunity, or 9-18% of Zillow’s 2024 consolidated revenue,” said Tomasello. 

Mortgage in particular is an exciting proposition. Zillow’s been scaling its call center mortgage business since 2022, and in 2024 achieved $3.1 billion in origination volume. Whereas Zillow makes roughly $5,000 in revenue per transaction from agents, mortgage revenue is estimated to be more than double that at $11,500.

In its enhanced markets, Zillow has shown the ability to sustain mid-teen attach rates on Premier Agent transactions. Should it expand enhanced markets to 75% of Premier Agents (essentially directing customers deep into the funnel and controlling the transaction and agent communication), Zillow could bring in between $10 billion and $20 billion annually in purchase volume, according to KBW. That translates to about $350 million to $700 million in revenue in mortgage alone.

Mortgage glory but tough competition

Tomasello and George also noted that roughly 40% of homebuying journeys start with mortgage shopping, and 80% of those prospective buyers don’t have an agent yet.

“While monetizing Zillow’s mortgage funnel will likely require additional investment to improve consumer awareness of the Zillow Home Loans brand, the opportunity could be quite meaningful, particularly when considering the potential to drive strong attach rates of mortgage-first funnel connections with Premier Agents,” they wrote. “Our review of similar mortgage-first agent referral programs—such as Rocket (RKT) and private player Clever Real Estate—suggests the potential for 70-80% attach rates of Premier Agent referrals on connections derived from Zillow’s mortgage-first funnel.”

Of course, building a mortgage operation soup-to-nuts is expensive, and the window of opportunity may force Zillow to scale up more quickly than it had planned (organically or through M&A).

Then there’s the competitive threats and risks from the organized real estate structure, which is evolving more than at any point in Zillow’s history.

“On the one hand, Rocket in many ways is trying to replicate what Zillow is trying to do, but from the opposite starting point with their moat in mortgage,” Tomasello said in an interview. “What we say in the report is that the market is obviously so fragmented, whether it’s brokerage agent referral market share or just mortgage purchase market share. Both of these players are at starting points no higher than the mid-single digits. So there’s clearly a lot of opportunity to consult to still consolidate and grow market share. The developments of today with Rocket and Mr. Cooper, show how how quickly that landscape can continue to change.”

In a Rocket-Redfin world, Zillow has some catching up to do.

“Rocket’s capabilities in mortgage are more advanced than basically anybody, so Zillow has to continue to up its game in mortgage — offer more financing options, loan types, speed up the time to close, and possibly offer consumers rebates in certain areas,” John Campbell, an analyst at Stephens. “But Zillow has that recognizable consumer brand.”